Enterprises for the people, by the people

 

ARUN MAIRA

 

The 100th birth anniversary of Dr Verghese Kurien, ‘India’s Milkman’, was celebrated on 26 November 2021 at the Institute of Rural Management in Anand (IRMA), which he had founded alongside the Amul dairy he set up for the dairy farmers’ cooperative he served all his life. It was a time to honour the man who created India’s ‘white revolution’, which increased the incomes and wealth of millions of small cattle farmers, and which also produced a modern cooperative industrial enterprise whose brands and products have competed successfully against large multinational companies.

Dr Kurien’s autobiography, I too had a Dream, begins with a letter to his grandson, Siddharth, in which he writes: ‘I started my working life soon after our country became independent. The noblest task in those days was to contribute in whatever way we could towards building an India of our dreams – a nation where our people would not only hold their heads high in freedom but would be free from hunger and poverty. A nation where our people could live with equal respect and love for one another.’

I was invited to deliver the Kurien Memorial Lecture at IRMA. I affirmed that his dream was my dream too. I explained why we must follow the path that Dr Kurien laid out in his remarkable life, to uplift the incomes and dignity of India’s poorer people.

Let me step back to look at the big picture, at how India and the world are progressing. India set out on 15 August 1947 towards its ‘tryst with destiny’, in Jawaharlal Nehru’s ringing words. But ‘we have miles to go before we sleep’ to reach it, in the words of Robert Frost which Nehru also kept on his desk.

Four systemic problems are impacting the well-being of Indian citizens. They are also impacting the lives of citizens in other countries. One is the degradation of the natural environment and climate change. While the rich world is focused mostly on the amount of carbon that has been put into the air, Indians have been suffering from the depletion of freshwater resources, and the deterioration of the quality of soil.

With 14% of the world’s population, India has only 2% of the world’s arable land. The quality of the soil has been ravaged by chemical stimulants for agricultural growth, making it less productive, requiring more stimulation which will cause further harm. India has only 4% of the world’s fresh water underground. It is depleting alarmingly, drawn out to feed farms and industries and homes. India has already become one of the world’s most water scarce countries. Clearly, we cannot carry on the way we have been chasing economic growth, while literally destroying the water and ground beneath our feet.

The second problem is that India is not generating enough decent jobs. In fact, India has one of the lowest employment elasticities, i.e. the numbers of jobs created with each unit of GDP growth. This is dangerous for a country with the largest number of young people in the world; from whose efforts economists have been anticipating a ‘demographic dividend’ to growth. This cannot happen if young people do not have jobs to earn enough, and to spend and save to boost the economy.

 

 

The third problem is the increasing inequality that is being created by liberal economics’ policies between the top 1% and the bottom 50% of the population. The so-called wealth creators at the top have been creating more wealth for themselves; the trickle down is dwindling. The share of global wealth held by billionaires surged to a record during the Covid-19 crisis, according to a group founded by French economist Thomas Piketty. About 2,750 billionaires control 3.5% of the world’s wealth, estimates the Paris-based Global Inequality Lab. That’s up from 1% in 1995, with the fastest gains coming since the pandemic hit, the group said. The poorest half of the planet’s population owns only 2% of its riches.

The fourth problem is the unequal power in shaping policies between the ‘haves’ and ‘have nots’. The belief is that with everyone having an equal right to vote, the outcome will be policies that will level the playing field for poorer people. Sadly, money speaks loudly even in democratic politics. Rich capitalists and their lobbyists have much greater power to shape policies to make it easier for them to do business and make profits, than the ‘socialists’ who want to tax them and provide better public services for the rest. These four forces have come together with great force in the new millennium, creating political storms in many countries. A new way must be found to steer safely out of them.

 

 

When the Soviet Union collapsed, political scientist Francis Fukuyama declared ‘The End of History’. He said the battle of ideologies was over. Capitalism (and private enterprise) had triumphed over socialism (and government) as the way to run an economy. Also, electoral, multiparty democracy had triumphed over single party politics as the way to govern a society. The ideology of the ‘Washington Consensus’ had won forever, he declared.

The two victors of the Cold War, capitalism and democracy, are now fighting each other, even in countries within the Washington Consensus. Social spending must increase, citizens say, and the rich must be taxed more. The ideological battle is on, even within the US Congress in Washington. Moreover, citizens seem fed up with their elected politicians everywhere. Surveys reveal declining support amongst young people for electoral democracy as the best means for governance, even in the USA, the proud leader of the so-called ‘democratic’ world.

Capitalism and democracy run on different principles. In capitalism, property rights are sacrosanct. In democracy, human rights must prevail. In capitalism, a million dollars invested in an enterprise give a million votes, and one dollar only one vote on how the enterprise should be run. In democracy, every beating heart, whether in a man or woman, in a black or white man, in a billionaire or a penniless person, gives an equal vote. This complicates the governance of capitalist enterprises, like business corporations, in democracies. An equal right for all human beings, whether they own any part of the enterprise or not is not their principle for decision-making.

 

 

The earth’s natural environment has been eroded by the relentless operation of the principle of property rights. Nature’s bounties, of land, minerals, water, and forests, are converted into resources for private enterprises to use as they will. They extract what they want and dump the rest as ‘externalities’ to their businesses and lives. Thus, the wastes from their economic enterprises choke up landfills, rivers, and oceans, and pollute the atmosphere too. The solution is to redesign production systems for a ‘circular economy’, in which nothing should accumulate in any part of the system, because that chokes up the natural system’s own powers of regeneration.

The same idea of circular flows, avoiding excessive accumulation in any part of the system, also explains what has caused the disease in the money economy, in which inequalities of wealth and political power have been increasing.

Farmers who till the land, and workers who labour with their own energy and skills, convert resources into useful products and services for others. The money surplus from their productivity flows upwards to the financial owners of the enterprise. In large capitalist enterprises the owners are financial investors, far away from the producers. They accumulate the financial surpluses. They trade their investments with each other in financial markets. Trading in financial markets amongst themselves, increases further the wealth of financial investors. Only a little of their growing wealth ‘trickles down’ to refresh the primary sources of wealth creation below.

 

 

Real wages have been stagnant in the USA and other countries over the past thirty years while the wealth of the richest has increased greatly. In India, the share of wealth cornered by the top 10% had already shot up from 51.6% of the total in 1991 to 63% in 2012.1 There is a lag in accurate statistical reporting, but all indications are that the disparity grew even larger since then, and even during the pandemic. ‘There is really this polarization on top of a world that was already very unequal before the pandemic,’ Chancel, co-director of the World Inequality Lab, says. The Lab estimates that billionaires accumulated $4.1 trillion of wealth during a crisis in which the World Bank estimates that some 100 million people have fallen into extreme poverty.

Wealth can trickle down into the pockets of the people below directly in the form of higher wages or higher prices for their produce. However, wages and small farmers’ prices are suppressed for improving the profits of owners of enterprises and the prices of their shares. Thus, stock markets can boom while wages are stagnant. The unionization of workers and farmers to aggregate their interests to gain political power is being suppressed in democracies, even by law, to ‘liberate’ economic markets so that prices of inputs can find their ‘natural’ levels.

 

Communists hate capitalists who, they say, exploit workers and steal the wealth produced by their efforts. In communist enterprises, the surpluses belong to the state which will ensure that the wealth is used for the welfare of the people. However, workers, even in state managed enterprises, are not owners of their own enterprises. Decisions about how their enterprise should be governed, and the uses of its surpluses, are taken in communist countries by remote bureaucrats. For them too, like for remote capitalist owners, the workers are mere cogs in a large-scale economic machine. The economic and political power in the system lies on top with them, not with the primary producers.

Mahatma Gandhi disliked communism because he said it took away poor people’s freedom to shape their own lives. He was a critic of capitalism for the same reason. He understood that economic freedom and political freedom come together. He advocated village scale enterprises in which the producers owned their means of production and traded with each other. Whatever financial surpluses they produced would be their own wealth. They would form cooperatives to own larger enterprises and accumulate more political power, and thus have greater control of their own destinies.

The ‘Amul’ model of dairy farming has proven this concept. Small farmers are owners of their own animals. They also own the dairies and other processing plants that buy their produce. They also own the organization that aggregates and markets the products of these enterprises. Thus, they largely control the value chain. Thereby almost all the profits made by the sale of the final ‘value added’ products to consumers in urban centres goes back to the small farmers.

Large-scale farming was the approach in the Soviet Union to improve agricultural outputs, as it is in the US, and it achieved equally spectacular results. However, it wiped out peasants in the Soviet Union and has swept off small farmers in the US. Kurien told Prime Minister Kosygin of Russia who visited him in Anand that top-down ownership of enterprises, whether by the state (in the Soviet model), or by remote investors (in the capitalist model) was the wrong solution. Kosygin said that Kurien’s approach would take a long time to get power to the people, suggesting that the top-down revolutionary approach was better. Kurien replied that there was no other way than the bottom-up way. Because the essence of democratic economic governance is that an enterprise must be of the people, for the people, and governed by the people too.

 

 

Let me step back to the global picture again. The large systemic problems, of environmental degradation, economic inequity, and undemocratic political systems, even in so-called demo-cracies, where power is concentrated in a few people, that are besetting humanity in this century, are visible everywhere. They are roughly mapped into the 17 Sustainable Development Goals that all governments have signed up to achieve.

These problems cannot be solved from above by experts in silos. Because the problems are intertwined. Problems of the environment cannot be addressed separately from problems of the economy. Societal and gender inequalities cannot be removed without changing economic systems. Complex problems take specific shapes locally. Environment and livelihood patterns of fishermen in tropical river basins are different from the environment and livelihood patterns for fishermen in Norway and Alaska, for example, or the environment and livelihood patterns of people in cities in Bangladesh and Sweden, and in mountain areas of the Andes and the Alps. Therefore, solutions to global systemic problems must be local system solutions cooperatively implemented by communities of local stakeholders. That is the scientific way to solve complex systems problems, not solutions by silos of global experts from above.

People must become responsible for the environmental, social, and economic conditions around them-selves. They must learn to cooperate with each other more and govern their own affairs. Experts and policymakers above them must listen to their needs and to their solutions. People on top of economic and political power systems must learn to support the people, rather than herding them into large-scale, top-down solutions for the sake of misguided economic efficiency.

 

 

Indian farmers protested peacefully for an entire year around India’s capital demanding the government withdraw laws it had passed without a debate in the Parliament. The laws, according to the government, would enable farmers’ incomes to be doubled. According to the farmers, the laws would put small farmers at the mercy of large corporations with deep pockets, without the government guaranteeing the prices for farmers, thus they could be driven out of business.

Many farmers who led the protest had been beneficiaries of government’s price guarantees for cereals to drive a ‘green revolution’. However, the scientific methods the farmers had been encouraged to use, to increase volumes of production, ruined the water tables and fertile soils of northern India.

Clearly, new solutions are required that are fairer to small farmers, and that are also environmentally sustainable. IRMA had convened a workshop to celebrate Verghese Kurien’s 100th birth anniversary to discover what can be learned from the ‘white revolution’
to regreen the green one. Leaders
of on the ground movements, who
are applying the principles of cooperative management in ‘natural (environmentally suitable) farming’ around India, assembled to distill insights for better economic policies and better management methods to increase inclusion and improve environmental sustainability.

 

 

The first insight is: inclusion and equity in governance must be hardwired into the design of the enterprise. Increase in the incomes and wealth of the workers and small asset owners in the enterprise must be the purpose of the enterprise, rather than production of better returns for investors.

The second: the ‘social’ side of the enterprise is as important as its ‘business’ side. Therefore, new metrics of performance must be used, and many ‘non-corporate’ methods of management learned and applied to strengthen its social fabric.

The third: solutions must be ‘local systems’ solutions, rather than ‘global (or national) scale’ solutions. The resources in the local environment (including local workers) must be the principal resources of the enterprise. The enterprise must be embedded in the local community from whom it gets its environmental resources, and whose well-being it must nourish by its operations.

The fourth: science must be practical and useable by the people on the ground, rather than science developed by experts to convince other experts. Moreover, people on the ground are often better scientists from whom scientists in universities can learn useful science.

The fifth: sustainable transformations are brought about by a steady process of evolution, not by drastic revolution (as Kurien told Kosygin). Like strong drugs to treat specific ailments, large-scale transformations imposed from the top can have strong side effects too. They slowly weaken the patient’s health, as the scientific managerial solutions of the green revolution have harmed the soil and water resources of northern India.

 

 

In summary, local ‘circular’ solutions, in which material and energy resources circulate within smaller scale systems with diversity within them, are more sustainable than systems designed for production of mono crops, or industrial products on large scales. In large scale production systems products must be transported and sold at long distances. Storage and transportation steps in the supply chain require more consumption of energy. They also add costs, which marketing organizations take out of the prices paid to primary producers to reduce prices to consumers. Business institutions designed for cooperative ownership of production and distribution chains can enable more creation of wealth at the bottom of the pyramid, as Amul has.

 

Devolution of political power to the people on the ground is essential for deep democracy. Governance of the people, for the people, must be by the people too. Therefore, local governance by citizens, of the villages, districts, and cities in which they live and work, is essential to make economies more inclusive and environmentally sustainable too.

 

Footnotes:

 

1. Christopher Jafferlot and Kalaiyarasan, ‘How India has Become an Unequal Republic’, Mint, 27 January 2021.

 

*Edited version of the 10th Dr Kurien Memorial Lecture delivered at IRMA.

**Arun Maira is the author of A Billion Fireflies: Critical Conversations to Shape a New Post-pandemic World and Transforming Systems: Why the World Needs a New Ethical Toolkit.